QUESTION 6

1. Which one of the following will increase the present value of an annuity?

	A.	Payment of annuity in the end instead of payment at the beginning.
	B.	Lowering the discount rate.
	C.	Reducing the future value of the cash flow.
	D.	Increasing the number of payments.
	E.	Lowering the payment amount.

QUESTION 7

1. Which is the best definition of a perpetuity?

	A.	The interest rate charged per period multiplied by the number of periods per year.
	B.	An annuity for which the cash flows occur at the beginning of the period.
	C.	An annuity in which the cash flows continue forever.
	D.	A level stream of cash flows for a fixed period of time.
	E.	A constant stream of cash flows without end that is expected to rise indefinitely.

QUESTION 8

1. Which is the best definition of an effective annual rate (EAR)?

	A.	The interest rate expressed as if it were compounded once per year.
	B.	A level stream of cash flows for a fixed period of time.
	C.	An annuity for which the cash flows occur at the beginning of the period.
	D.	The interest rate expressed in terms of the interest payment made each period. Also, quoted interest rate
	E.	The interest rate charged per period multiplied by the number of periods per year.

QUESTION 9

1. Which one of the following statements is true concerning bond ratings?

	A.	Bond ratings are based on both the risk of default and the interest rate risk.
	B.	All else equal, a bond rated BB should pay a higher return than a bond rated B.
	C.	A bond rated BBB or lower is considered a junk bond.
	D.	Bond ratings are based only on the risk of default.
	E.	By mutual agreement, DBRS and Standard & Poor's issue comparable ratings on all bonds.

QUESTION 10

1. When a bondholder is granted the right to force the issuer to repay the bond prior to maturity, the bond:

	A.	Contains a zero-out provision.
	B.	Contains a call provision.
	C.	Contains a put provision.
	D.	Is a convertible bond.
	E.	Is an income bond.

QUESTION 11

1. A debenture is:

	A.	An agreement whereby actions of the issuer are limited for the protection of the bondholders.
	B.	A bond which pays payments to whoever has physical possession of the bond.
	C.	The legal agreement between a bond's issuer and the bondholders.
	D.	A secured bond which is backed by specifically-named collateral.
	E.	Unsecured debt which generally has a maturity of 10 years or more.

QUESTION 12

1. Which is the best definition of an annuity due?

	A.	The interest rate charged per period multiplied by the number of periods per year.
	B.	A level stream of cash flows for a fixed period of time.
	C.	The interest rate expressed as if it were compounded once per year.
	D.	The interest rate expressed in terms of the interest payment made each period. Also, quoted interest rate
	E.	An annuity for which the cash flows occur at the beginning of the period.